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Peak Insanity: SEC Plans to Temporarily Ban Short-Selling
Mish, please advise your friend that a 'free economy' has not existed in these United States for almost 100 years. This is the predictable culmination of a century's worth of State economic intrusion and corporatist authoritarianism. Welcome to the really real world.
Oil May Trade in the $80-100 Range for a While
Oil Demand Down, Supply Up
www.theoildrum.com/nod...
Includes, but does not limit itself to, the megaprojects data. So the question becomes: if you use this production analysis as a basis for comparison to anticipated consumption, does that change the conclusions? Or does it just obfuscate things?
Charlie Maxwell to Barron's: $300 Oil is Inevitable
What seems senseless to me are those analysts who employ magical thinking to assert that an increase in price will seemingly magically create more oil in the ground (light, sweet, of course) to drive the price down. Or to assert that 'human ingenuity' will miraculously be capable of wholesale massive fossil fuel replacement at the precise moment when we're on the way from being an affluent nation to 3rd world status due to decades of extreme fraud in the financial and political systems.
If human ingenuity could produce miracles on schedule, where's the battery technology that would enable feasible electric cars? Decades, and a huge dollar prize, have not facilitated success in this one technical area, and we'd need dozens of similar breakthroughs to replace oil.
Friday's Employment Report: A Sobering Dose of Reality
BTW, regarding the 'New Deal' - in fact, those policies did not 'save' America back in the 1930s - rather, they tipped us from a bad recession into a full-out depression - and then into a global war to obscure that fact! And the war itself did not 'rescue' our economy - that did not happen until 1947, after some (but only some) of the socialist economic controls had been dismantled (does nobody in America believe in free market capitalism anymore? the New deal was socialism, pure and simple - how anyone can still entertain the notion that gross misallocations of capital and monstrous distortions of the pricing system could have led to 'prosperity' is beyond me). The mythology that FDR 'saved' us is just one of the innumerable absurd illusions to which Americans cling, and which have led us to the edge of the precipice, where we stand today, confronting the abyss.
So what is to come? Well, let's not forget that America does not operate in a vacuum. A vast amount of government debt is held by foreign nations, and in many cases we've worked hard to ensure their enmity even as we've begged them to keep buying US Treasuries. As we continue to follow hegemonic policies (and make no mistake - both McCain and Obama are solidly on board with continuing these illusion-driven policies) which give the rest of the world cause to hate us, it seems more and more likely that a global realignment is coming, with America left purposefully isolated. Does anyone seriously think that the Chinese, the Indians, the Russians, the Japanese, the EU and others are not discussing amongst themselves possible new monetary systems to replace the post-Bretton Woods insanity? It was the US, after all, which reneged on that agreement and pushed the rest of the world toward fiat money which is the underlying engine of destruction.
Consider: we now have a 3rd world political system and a 3rd world banking system, in terms of the egregiousness of institutional fraud in both systems (not to mention the more general corporate entanglements in every aspect of that corruption). And it seems likely that we are descending into 3rd world status economically as well - though never was a 3rd world country so despised, even by its friends.
Is it so hard to grasp that our situation may not be a problem which needs to be fixed (it's unfixable), but rather a new condition to which we will need to adapt? At some great cost, obviously.
There seems to be every reason to think so (and very strong historical lessons which indicate this is highly probable) and very few logical or fact based reasons to think not. The Age of American Empire is over. We were warned - over 200 years ago, by a great American allegedly esteemed by all but in fact all but ignored except by a few:
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
- Thomas Jefferson
Sarah Palin: Wall Street's Candidate
False Data Clobbers the Markets
But let's not stop there - let's look at the macro picture - the author of this piece suggests:
"Why doesn't the government just hold off a few weeks before releasing its reports? No data is better than false data. The latest GDP growth revision is absolutely inexcusable. I can handle a small revision from 3.1% to 3.2% but 1.9% to 3.3%? Wouldn't it be better to just wait another 3 or 4 weeks and get the numbers correct?"
Why in the world would anyone presume that GDP numbers - that issue from the same government that emits the laughably fraudulent CPI - are 'correct' at any point along the revision trajectory?
IMO - it's all false. It's all massaged. It's all a mirage - an illusion. I wonder if the author of the piece above ever bothered to look into how the GDP is actually calculated. As one widely available short essay on the subject notes:
"Much of the data used in GDP is collected by sending out surveys to different companies. They will send out surveys to a select bunch of retailers and manufacturers to ask for details of their output or sales on a monthly basis. Then comes the estimate of the whole. The governments can obviously use this to their advantage by selecting the companies that they know are steady companies and not choose the smaller companies who are more likely to be erratic. Therefore most smaller companies will never get asked to perform a survey for the government as this may upset the figures."
So the number is not only inherently inaccurate (and we have not even gone into the forms of economic activity that the GDP explicitly excludes), it is an invitation to governmental manipulation. After all, how would one prove that "the economy" (as though this were so easily defined in the first place!) grew at this rate or that rate? The only reason to believe the govt stats are accurate is if you believe the govt does not lie as easily as you and I breathe, which is demonstrably false.
So it's not just metals, not just the market, but the entire economic picture as portrayed by government statistics that is one big manipulation.
As far as I can tell, the one thing that one *can* rely upon is that a government which uses a fiat currency and is out of other options, especially one which is on the hook for $60T+ in unfunded obligations over the next ~75 years and has no other way to 'meet' these, must inflate like mad. Period. And at some point, manipulation or not, that's good news for gold, in the long term. And probably for oil, too, for as long as it's priced in USD anyway.
Students of history will know that in every single instance of the deployment of a fiat currency, starting 1000 years ago in Szechuan Province, China, the outcome is always the same - dozens of examples across history all tell the same story: run away inflation, sky rocketing of gold prices, collapse of the currency.
Those who are not students of history - well, Santayana had them pegged.
False Data Clobbers the Markets
Naked assertions without any logic or data to support them are less than persuasive - the author may wish to look up the definition of 'analysis' because this exercise in magical thinking does not qualify. Don't get me wrong - I'm a big fan of magical thinking - it allows me to buy on the dips from folks who engage in it. Let's all repeat together: "oil is not a finite resource - and besides we can always fall back on magic pixie dust if need be."
It really doesn't matter how much oil is in the ground, what matters is whether anyone is ready, willing and able to pay the costs (monetary and otherwise) to extract it. How many polar and deepwater drilling rigs are there in the world? What's the ERoEI for tar sands? Oil shale? Why aren't the IOCs already busy drilling on the leases they have in the OCS? Where does the natural gas come from, given that the same peak dynamics are impacting that fossil fuel as oil? What's the supply situation for uranium look like, and how much energy will it cost to find, mine, extract, transport and process it? How much would it cost to build and operate enough nuclear plants? Wind farms? Solar plants? What's the amortization picture for all those gas fired plants that just got built? What's the feedstock for hydrogen?
And bottom line: who is going to pay for all of this considering we as a nation are dead BROKE and the banks are reluctant to lend money for CARS, let alone for massively capital intensive projects like, say, replacing the entire energy infrastructure of this nation over a quick time span of only a couple of decades?
For those who prefer a little reality in crafting their long term perspective, I suggest the 2005 Dept of Energy Study, and it's 2006 and 2007 follow up reports on mitigation strategies, by Dr Robert Hirsch:
www.netl.doe.gov/publi...
www.d-n-i.net/fcs/pdf/...
www.d-n-i.net/fcs/pdf/...
Hirsch's bio:
* Senior Energy Program Advisor, SAIC (World oil production)
* Senior Energy Analyst, RAND (Various energy studies)
* Vice President of the Electric Power Research Institute (EPRI).
* Vice President and Manager of Research and Technical Services for Atlantic Richfield Co. (ARCO) (Oil and gas exploration and production).
* Founder and CEO of APTI, a roughly $50 million/year company now owned by BAE Systems. (Commercial & Defense Department technologies).
* Manager of Exxon’s synthetic fuels research laboratory.
* Manager of Petroleum Exploratory Research at Exxon. (Refining R & D).
* Assistant Administrator of the U.S. Energy Research and Development Administration (ERDA) responsible for renewables, fusion, geothermal and basic research. (Presidential Appointment).
* Director of fusion research at the U.S. Atomic Energy Commission and ERDA.
Next, google Matt Simmons, CEO of the largest energy investment bank in the world, and take a look at any of the numerous presentations and interviews he's given. Here are some startingf points:
www.financialsense.com...
www.ogfj.com/display_a.../
www.economist.com/peop...
www.simmonsco-intl.com...
Finally, how about testimony from one of the most conservative Repubilcan Congressmen, Roscoe Bartlett:
bartlett.house.gov/Ene.../
www.energybulletin.net...
www.energybulletin.net...
Folks, these are not Birkenstock wearing tree huggers. Not sure what the energy background of the author of this bit of speculative fiction above is, but I'm willing to bet he's just a tad overmatched here.
"The other fallacy among oil bulls is that the growing middle class of India and China will cause a world wide shortage. ...Germany, Italy, Spain, France, Japan and Russia are losing drivers every year. By 2030 there will be 80 million fewer Europeans than there are today. Japan will lose 60 million people. Russia 30 million."
Drivers? Is the author under the impression that the only use for petroleum is *gasoline* and the only users are shoppers and commuters?! What about agriculture? Mining? Commerical transportation? Manufacturing? Plastics? Pharamceuticals? Asphalt? etc...
Pop quiz: what is the rate of GLOBAL population growth? (Hint: all these people will want to eat)
Cherry picking a half dozen nations whose replacement rate is low isn't analysis - it's blatant bias and distortion (in the best case, ineptitude) seemingly intended to introduce false data. Precisely the problems this piece of "analysis" (and I do use that word loosely!) purports to address.
Writing an essay on misinformation and then, within it, promulgating misinformation - Orwell would be proud.
Precious Metals: Emotions Still Stronger Than Fundamentals
Perhaps 'some advisers' have determined that your 'change' - in dollar fortunes - does not appear to have any basis whatsoever in fundamentals, and therefore does not, in fact, represent a lasting change at all, but a transient rally to be followed by a crash.
Or did the US government suddenly do a 180 and become the very model of fiscal responsibility when I wasn't looking?? Fat chance.
Why $200 Oil Is Good for US Markets
"The Great Depression needed the Second World War to terminate its grip on the economy."
Conclusively disproven back in '92 by Robert Higgs - journal article here:
www.independent.org/pu...
Just an old wive's tale. Aside from that, though for somewhat different reasons, I agree that $200/bl oil would be a good thing.
The Strange Case of Dr. GLD & Mr. Bullion
Classic straw man assertion. Most people I know who buy physical gold - and I know quite a few - do so as a long term insurance plan because they have learned the lessons of history when it comes to fiat currency and inflation. Hardly religious. In fact, it is much more indicative of magical thinking to place your faith in technical analysis based on a measly few decades than to draw conclusions based on an analysis of thousands of years of human history.
The 'real world' with which we are faced is unlike anything we have faced before, which means it is entirely plausible that we are moving into a new paradigm, in which case, the fundamental assumptions of technical analysis become invalid.
It is not proven, but certainly plausible that those investing in physical gold are the ones living in the 'really' real world, and posters like the one who posted this simple minded claptrap are among the deluded.
As to credit crises being 'disinflationary' [sic], while there are certainly deflationary *components*, this does not mean that the *net* effects of the current credit crisis - including Fed actions - will be so. Especially once you consider the $60T+ in unfunded liabilities due to governmental obligations over the next two decades. That money will have to come from somewhere and anyone with a marginal knowledge of history can tell you exactly what is going to happen. Because it is what has happened in every single case across 1000 years. Feel free to 'believe' we are somehow special, and that it can't happen here, but be aware that this is nothing more than a demonstration of historical ignorance and magical thinking.
That is, if you think we are in a long term deflationary trend, you really need to put your faith aside for a moment and study history. It tells a different tale.
Start here:
www.shadowstats.com/ar...
Freddie and Fannie: Living in the Past
I would add the following: the entire argument above is premised upon the notion that increasing the rate of home ownership is an unalloyed good in all ways and for all concerned - for the economy, for individuals, for families and communities, etc. I do not think things are anywhere near this simple, and I positively assert that that premise is debatable, and in my view wrongheaded. Not least because malinvestment and market/risk distortion - which is what Fannie and Freddie represent - always leads to pain in the end. And the longer we postpone this pain - Lex's apt the 'great unwind' - the more severe it will be. And we certainly seem determined to postpone it just as far and as hard as we possibly can, praying for a miracle to deliver us from the towering wall of pain that is headed straight for us. If the past is any guide, we will somehow figure out a way to make sure that most of the pain falls on our children and grandchildren, just like most of our debt will. That's what you get for trusting politicians.
Hedge Fund Manager's Notebook: Blood on the Streets - Buy Russia
Where Does Oil Go from Here?
"If Americans can’t afford 140dollar oil- how can China and India afford it?"
Gave me the best laugh I've had in some time. It posits America as wealthy and China as poor - now *that* is rich! Thanks for the laugh.
Seriously, just how many US Treasuries is China sitting on? $2T worth? More? And just how far in debt is America, and are Americans?
Puh-lease...that hoary old myth of the affluent American and the poor rest-of-the-world is not exactly 'congruent with reality', as they say. I think someone needs to get out more and stop reading fairy tales. We're flat broke, and so are our kids, their kids, and their kids after them, compliments of those thrifty guys and gals in DC. And with Helicopter Ben spinning up the printing presses for a full court press to save America's banks and brokerage houses from the folly of their idiocy at our expense, that's only going to get worse.
The question you should be asking is *not* how can China afford $10 gas (hint: bilateral agreements will be the new oil pricing regime - and it probably won't be priced in USD anymore anyway), it's how will I be able to afford bread when it's USD1000 per loaf?
Commodities Correction: Painful but Healthy